EIM40221 - Employee not resident or not ordinarily resident in the United Kingdom: calculation of general earnings in respect of duties performed in the United Kingdom

Sections 25 and 27 ITEPA 2003

Employees who are not ordinarily resident or not resident in the United Kingdom are chargeable to income tax under Sections 25 and 27 respectively on general earnings in respect of duties performed in the United Kingdom. Where all of the duties are performed here calculation is not difficult but where duties are performed partly in the United Kingdom and partly overseas, time apportionment is generally used. See EIM40304 and Statement of Practice 5/84 (SP5/84). For detailed guidance about calculating earnings in respect of UK duties, Appendix 2 at EIM77020 contains an adapted version of an article that appeared in Tax Bulletin 63 (February 2003).

To calculate the amount of the general earnings in respect of duties performed in the United Kingdom:

• calculate total general earnings (both cash and non-cash benefits) from the relevant employment for the year
• establish the number of workdays that the employee worked in respect of the employment in the year. This is the denominator in the apportionment fraction.
• establish the number of workdays that the employee spent working in the United Kingdom in the year. This is the numerator in the apportionment fraction.

Where the same amount of salary is paid throughout the year, the general earnings to be attributed to United Kingdom duties can be calculated in this way. Accept computations on this basis unless it seems likely that the rate of remuneration changed during the year and the amount involved is worthwhile. If there is more than one employment deal with each one separately.

See example EIM40222.

SA Return employment pages

The employment pages of the SA Return use a different approach to produce a computation of liability under Section 25 or Section 27.

• Total general earnings are reported in the cash and benefits sections.
• Box 1.31 is a deduction box in which non-Section 25 or non-Section 27 earnings (and non-remitted Section 26 earnings) are entered.
• Helpsheet IR211 is available to assist people to calculate the amount to be entered in Box 1.31.

Tax equalisation

See Appendix 4 at EIM77040 for guidance on how to calculate earnings in respect of UK duties of tax equalised employees who are not ordinarily resident in the UK.